Shares in major UK property developers have fallen this afternoon, after an announcement that they will be hit with new taxes to pay for the government’s unsafe cladding removal scheme.
Housing secretary Robert Jenrick today announced two new taxes on UK property developers to help pay for the government’s efforts to remove unsafe cladding from high rise buildings post-Grenfell.
One levy will be aimed at large UK property developers applying to build new high-rises, while another is set to hit all developers in the industry from 2022.
Jenrick said the new taxes would be to “ensure the industry takes collective responsibility for historic building safety defects”, with the tax bill expected to be more than £2bn.
The news sent shares in major property developers Barratt, Berkeley, and Taylor Wimpey tumbling this afternoon.
The new scheme sees the government pay for all unsafe cladding to be removed from all “high rise, residential buildings of 18 metres of above or above six stories in England”.
Leaseholders in blocks that are between four and six stories will benefit from a financing scheme to help them remove unsafe cladding from their properties at a cost of £600 a year.
Jenrick said the works taken together mean the government “is providing more than £5bn, including a further £3.5bn announced today, plus the significant cost of the very generous financing scheme”.
“The taxes will ensure the largest property developers make a fair contribution to the remediation programme in relation to the money they make from residential property, reflecting the benefit they will derive from restoring confidence to the UK housing market,” he said.
The type of cladding identified in Grenfell Tower, Aluminium Composite Material, has been removed from 95 per cent of residential property in the UK.
However, there are still various types of other cladding that is present in hundreds of thousands of flats across the country.
Statistics from the Association of Residential Managing Agents found around 274,000 flats in the UK have dangerous cladding, which equates to more than 650,000 people.
Kate Henderson, chief executive of housing association lobby the National Housing Federation, said: “We are supportive of anything that aims to recover costs from those responsible and will look forward to seeing the detail of a new development levy.
“It is important that any levy does not simply get passed on, increasing the cost of affordable homes that not-for-profit housing associations purchase from developers, and future homes bought by individuals on a shared ownership basis.”
Andrew Montlake, managing director at UK mortgage broker Coreco, said taxpayers would think the new levies are reasonable.
“Developers have been singled out to help pay for cladding remediation through an ongoing tax, and many outside the industry will see that as a wholly justified course of action,” he said.
“You’ve made your bed, now lie in it.”